MERITS DEMERITS

Simple and easy to calculate.

Unsuitable for assets having long life and
Comparison of profits is easy.
more value
Suitable for small firms.
Undue pressure on final years.
Assets can be completely written off.
 Loss of interest.
Knowledge of total depreciation charged.
 MERITS DEMERITS

Reducing balance method is easy to  Reducing balance method charges heavy amount

understand and simple to implement. of depreciation in earlier years.

Reducing balance method is The book value of asset never become zero.

acceptable for income tax purposes. Loss of interest

Amount charged to the profit & loss

account towards depreciation and

repairs will remain more or less uniform

year after year

ANNUITY METHOD:
MERITS DEMERITS

Annuity method takes interest on capital

The annuity method is difficult to understand.
invested in the asset into account.
Computation using this method becomes
Annuity method is regarded as most
more complicated where there are frequent
exact and precise from the point of view
additions, dismantling, etc taking place
of calculations.